1. Introduction
Ukraine opted for economic integration with the European Union (EU) when it signed an Association Agreement (AA) in 2014. The agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA), is unprecedented in terms of the reform commitments made by a country without the prospect of eventual EU membership.1 Once the agreement is implemented, Ukraine will benefit from increased trade, integration into the EU single market, and institutional and socio-economic modernization.2
However, the scale of Ukraine’s reform commitments is not matched by its capacity to implement them. All post-communist countries suffered from this type of mismatch in the 1990s. It is especially pronounced in those post-Soviet countries with no foreseeable prospect of receiving investments from EU structural and cohesion funds.
Notwithstanding this caveat, Ukraine has taken on its commitments precisely to kick-start domestic reforms and to complete its transition from a post-Soviet country to a liberal democratic state with a functioning market economy. After a quarter of a century of institutional malaise, this requires a fundamental transformation of state institutions and the economy.
Essentially, the AA-DCFTA is a bilateral agreement that regulates relations between the EU and Ukraine and also contains a free-trade area. The agreement covers a large swathe of the EU acquis – the accumulated body of acts and court decisions that constitute EU law. As well as removing (or lowering) tariffs and quotas, the AA-DCFTA will progressively align Ukraine’s regulatory frameworks with those of the EU.3 This process is known as ‘legal approximation’, whereby EU rules are incorporated into national laws and institutions are created or reformed to administer those rules. Legal approximation is often viewed as a technocratic, ‘low-politics’ process. Yet it can have a profound impact on how national institutions function.
Crucially, the implementation of the AA-DCFTA is premised on strong state capacity to enact new rules. State capacity refers to the state’s institutional capability to design and carry out a range of public policies that deliver benefits and services to citizens and business. This capacity is precisely what Ukraine lacks. Herein lies the paradox: Ukraine has pursued the agreement as a template for reforming the state, perhaps because this offers the best chance of reform, but does not possess the capacity to implement it. Building state capacity entails having a long-term vision that may need to override short-term political gain. It could be argued that because European integration requires long-term planning, there is a lack of political will to go through with it – since the political class tends to focus on short-term political and economic priorities in order to stay in power. This tension demonstrates why it is particularly important to develop state capacity to implement reforms regardless of changing political configurations and wavering political will.4
In recognition of the gulf between commitment and capacity, the EU provides substantial assistance to Ukraine. Alongside other donors, it has offered aid to the country since the early 1990s, but recently the nature of its assistance has evolved significantly.
EU assistance to Ukraine over nearly three decades has been complex and multifaceted, and has had positive consequences. In broad terms, integration with the EU became a lynchpin of the country’s reform process. More specifically, tangible successes, such as obtaining a visa-free regime, were directly linked to EU demands and aid. Now, the assistance aims to increase the capacity of the state to implement the commitments embedded in the AA.
This paper assesses the scope and type of assistance being provided, focusing on its dynamic nature and the relative effectiveness of different components.5 There has been little analysis of EU assistance per se.6 Various EU documents exist that outline the scale and amounts of assistance. But there has been little systematic, in-depth and independent assessment of the intended results and actual impact of these efforts in Ukraine.7
As with other countries in the EU’s European Neighbourhood, supporting Ukraine’s efforts to implement the reforms required for integration will continue to present challenges for the EU, but these echo wider and well-recognized problems facing most international donors. In Ukraine, the fundamental challenge is the weakness of state institutions; the country’s notorious corruption and state capture are just symptoms of this.8
While the availability of sufficient assistance funds is important, so too is the effectiveness with which they are used to reform state institutions.9 Since 2014, the EU has launched important innovations that have already made a marked difference; as a result, assistance to Ukraine is now systematic, dynamic and tailored. However, the main improvements have taken place at the macro level, with the European Commission adopting a more strategic approach that embraces whole sectors and coordination with various donors. At the micro level, however, there remains much room for improvement, with ineffective modes of aid – through technical assistance – still on offer.
1 Blockmans, S. (2017), The Obsolescence of the European Neighbourhood Policy, Brussels: Centre for European Policy Studies, and London: Rowman and Littlefield International.
2 Ecorys and CASE Ukraine (2007), ‘Trade Sustainability Impact Assessment for the FTA between the EU and Ukraine within the Enhanced Agreement’, http://trade.ec.europa.eu/doclib/docs/2008/january/tradoc_137597.pdf (accessed 12 Jun. 2018). For a more recent and general analysis see Adarov, A. and Havlik, P. (2016), ‘Benefits and Costs of DCFTA: Evaluation of the Impact on Georgia, Moldova and Ukraine’, Vienna Institute for International Economic Studies and Bertelsmann Stiftung, https://wiiw.ac.at/benefits-and-costs-of-dcfta-evaluation-of-the-impact-on-georgia-moldova-and-ukraine-dlp-4111.pdf (accessed 12 Jun. 2018).
3 For a compact and accessible analysis of the AA-DCFTA, see Emerson, M. and Movchan, V. (eds) (2018), Deepening EU-Ukrainian Relations: What, why and how?, London: Rowman and Littlefield International.
4 State capacity cannot be simply reduced to policymaking capacity. The creation and implementation of rules are premised on a range of factors, such as levels of horizontal organization across sectors (coordination), organizational culture, bureaucratic efficiency and so on.
5 For earlier studies, see Gressel, G. (2016), Keeping up Appearances: How the EU is supporting Ukraine’s transformation, ECFR, http://www.ecfr.eu/publications/summary/keeping_up_appearances_how_europe_is_supporting_ukraines_transformation; Chromiec, J. and Koenig, N. (2015), ‘Supporting Ukraine’s Difficult Path Towards Reforms’, Policy Paper 143, Jacques Delors Institut–Berlin, http://www.institutdelors.eu/wp-content/uploads/2018/01/ukrainekoenigchromiecjdienoct2015.pdf?pdf=ok (accessed 12 Jun. 2018).
6 Particip GmbH, Analysis for Economic Decisions, Development Researchers’ Network, Deutsches Institut für Entwicklungspolitik, European Institute for Asian Studies, Instituto Complutense de Estudios Internacionales, and Overseas Development Institute (2010), Evaluation of the European Commission’s Cooperation with Ukraine (2002–2009), Rome: Particip-ADE–DRN-DIE–ECDPM-ODI, https://ec.europa.eu/europeaid/strategic-evaluation-eu-cooperation-ukraine-2002-2009_en (accessed 12 Jun. 2018).
7 The website of the European Commission’s Directorate General for European Neighbourhood Policy and Enlargement Negotiations (DG NEAR) lists external evaluations commissioned since 2006; the list is very short for Ukraine and thematic evaluations are even fewer. The most relevant study, on the 2002–09 period, notes that EU projects in those years achieved their intended outputs, but that there were few attempts to evaluate their results and outcomes. The two most significant recommendations were about monitoring outcomes and impacts of supported interventions and applying a sector-wide approach more widely. Only the latter was implemented by the European Commission.
8 For a comprehensive analysis of the reforms in Ukraine, see Ash, T., Gunn, J., Lough, J., Lutsevych, O., Nixey, J., Sherr, J. and Wolczuk, K. (2017), The Struggle for Ukraine, Chatham House Report, London: Royal Institute of International Affairs, https://www.chathamhouse.org/publication/struggle-for-ukraine (accessed 12 Jun. 2018).
9 While the focus here is on assistance aimed at state institutions and infrastructure, other domestic actors, such as civil society, media and business also play a pivotal role, not least because they can put pressure on the government to change policies. It would be useful to analyse the effectiveness of EU support for these non-state actors, but this is beyond the scope of this paper.